Hardcore gamer builds Chinese empire

In the months leading up to the Summer Olympics in Beijing, with world events being what they are, it's not often that foreigners residing in the mainland turn to China Daily's English pages for the news. This little gem is an exception, however. When you picture the man who's fast becoming a leading light in China's expanding online gaming industry, who do you see?

Maybe you picture a slick twenty-something entrepreneur from Hong Kong, decked out in a $5000 suit and shuffling between calls on a few wafer-thin cell phones. Or do you envision a middle-aged bureaucrat turned businessman from Beijing, using his network of connections and riding the tide of interest in online games? Stereotypes aside, no matter how you picture Shi Yuzhu, that aforementioned 'leading light,' you're probably wrong. The 46-year-old CEO of Giant Interactive (NYSE: GA) is more outwardly eccentric than most would guess. Shi, who prefers tracksuits over 3-piece-suits, is reportedly the first CEO ever to ring the NYSE bell in anything but formal attire... much less athletic wear.

Shi doesn't just make games, he plays them. Sometimes between 10 and 15 hours in a given day, according to China Daily. A given workday for Shi involves him playing games -- namely his company's hugely successful title ZT Online (also referred to as 'Zhengtu' or 'Zhengtu Online') -- as much as possible, while dividing his remaining attention between an MSN chatroom for Giant Interactive developers and a second for the ZT Online gaming community. The latter of these chatrooms places Shi squarely in the sights of his company's player base, where occasional outbursts and obscenities are directed towards him. "The more players curse, the more they like our games," Shi says to China Daily. While that's certainly one way to look at it, it's clear that Shi Yuzhu has thick skin.

PlayNoEvil described ZT Online as "EVE Online meets Las Vegas." Bold words, but they're essentially correct. ZT Online's free-to-play is better characterized as 'RMT-to-play.' The fact that RMT plays such an integral part in the title would make you think that players would shy away from ZT Online. But the truth is quite the opposite: ZT Online hit 2.1 million peak concurrent users just two weeks ago. Despite whatever controversies surround the title, and there are a few, it's clear that Shi is offering something to gamers in ZT Online that no one else is. At least not on the scale of the Giant Interactive hit. So what is it about ZT Online that has drawn players in droves to the title?

There was an article about ZT Online called 'The System,' which briefly ran in China's Southern Weekly newspaper and was hastily pulled from its online content under questionable circumstances. An article written at Danwei has all the info about the 'objectionable' piece, as well as an English version of the original article itself. 'The System' is perhaps to the Chinese what 'The Great Scam' is to western readers; even if it isn't your game, it still proves to be an interesting read and a window into a game system you've likely never even heard of before. The picture that 'The System' creates for the reader is one of a a cutthroat virtual world of RMT-fueled struggle.

As a new character in ZT Online, a player learns that he or she is a scion of a forgotten royal family, who must return to society and establish a name for themself. The goal is to form a kingdom that propels the player to that glorious station of emperor, thereby attaining the ultimate degree of power in the game. But to do so means a player must face off against, literally, millions of others who also vie for that same power. Brutality in the game is not only found in the level of violent struggle inherent to the title, but also how the game is less about overcoming the odds and more about overcoming an impossible grind. Fortunately for some, the long road to power in ZT Online is one with many shortcuts.

Having the most elite gear -- which players are encouraged to purchase with real-world currency (Chinese renminbi, or RMB) -- gives a player vast advantages over lower level or non-RMT players. And this is where the controversy in ZT Online begins: RMT is a built-in game mechanic. Those who are willing to spend the most will gain the most. Players who refuse to be RMB gamers and rely on their own abilities and earned achievements essentially lose the game. RMT opens the game up for players, allowing them to ascend to the highest character levels and stride like gods among lesser beings -- those players who are not willing or able to pay for that degree of achievement.

This is not to say that the game cannot be played by low-level characters. It can be. ZT Online even pays its players a small stipend in virtual currency for continued activity in the game, which can easily and legitimately be converted to real-world currency. Perhaps the most significant link between ZT Online's virtual economy and the real economy is that players were given stock options following the Giant Interactive IPO. That's right -- players actually earned shares in Giant Interactive through playing the game. For the more adventurous, the game features a gambling system akin to a lucky draw, where players pay real world RMB for keys that open treasure chests. Each such key represents a chance at finding a rare or powerful item, but in order to preserve that item rarity, most treasure seekers are doomed to fail. This aspect of 'The System' invariably draws comparisons to playing a slot machine, but of course this 'gambling' element of the game makes it even more compelling to some.

Perhaps the real secret of the title's appeal to Chinese gamers is a rather simple one: it was made for them. Korean ports abound in mainland China's online gaming industry, as do certain other foreign titles, but there may be cultural hurdles that hinder the adoption of these foreign MMO's. Not so with ZT Online, which is remarkably in tune with what Chinese gamers want. It's that combination of elements in ZT Online, some of which are unique to the title, which is responsible for its staggering number of paying customers. But the game hasn't sold itself.

Shi Yuzhu knows how to market his products. The man amassed a small fortune with his previous business venture, the popular vitamin drink Naobaijin, through an extensive marketing network. He presently employs a 2500-person marketing team for ZT Online, which goes out and makes contact with gamers directly, rather than simply blitzing them with targeted ads. "We plan to increase the headcount of our marketing team to 20,000 within three years," Shi tells China Daily. Cabeza Howe from the investment-focused site Seeking Alpha writes:

His national marketing network filled internet cafes with ad posts of ZT Online on every prominent corner, from the wall, the door handle, to the restroom. They even offered a ZT-Online-exclusive incentive to the internet cafes. Those that signed up for this incentive would only operate ZT Online exclusively in the cafés.

Shi broke many of the conventional rules of establishing a successful online game in China. In fact, his success seems to point out that hard-and-fast rules about how games should be marketed are not set. He focused on smaller cities, creating buzz for ZT Online before ever reaching the major cities, where promotional costs would be far greater. That buzz generated by players (and the media) in second- and third-tier cities preceded ZT Online's arrival in top-tier cities like Shanghai and Beijing, where it found fast acceptance.

Shi Yuzhu's concern with differentiating ZT Online from its competitors while appealing to different types of gamers has paid off. Shi recognized that there was a niche for a game that catered to those with more money than time, but not the exclusion of other types of gamers. ZT Online provides enough activities and mini-games to entice casual gamers, without losing the interest of more devoted players with large blocks of free time yet little cash to spend.

Shi's approach to online gaming reflects a dichotomy in the industry between East and West, concerning pure gaming experiences and RMT. Or does it? We're now inundated with free-to-play games with microtransaction systems built-in. No one forces a player to pay more, but the temptation is always there -- either for greater personalization or to speed up advancement. EVE Online, for instance, features a developer-supported flavor of RMT called EVE Time Codes where players can purchase their game time with in-game currency. Conversely, EVE Time Codes can be used to convert real world cash into virtual currency (although no EULA-friendly option exists to turn in-game profits into real world wealth), but that is where the comparisons between EVEOnline and ZT Online end.

In spite of the controversy surrounding both ZT Online and Shi Yuzhu -- or perhaps because of it, and the free attention it brings -- Giant Interactive has been phenomenally successful. The company just announced a first quarter net revenue of USD 67.3 million, and there are no signs of them slowing down. Shi is maintaining this momentum by launching new titles in 2008 and 2009, including King of Kings III and Empire of Sports. If what he's accomplished with ZT Online is any indicator, you can be certain that Shi Yuzhu will infuriate some players while pleasing others, masterfully manipulating the hype and cashing in all the while.